Option Valuation: The Riskless Portfolio
Interactive

Option Valuation: The Riskless Portfolio

Intuition Publishing Pty Ltd
Updated Sep 24, 2020

The unknown drift component is an issue when attempting to price call and put options, but estimating the value using a binomial model and the concept of a riskless portfolio is a way to get around the problem. We look at this method here, and also discuss option valuation using the assumption of risk neutrality.

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